Hudson’s Bay Co. is eyeing a joint venture in Europe with an Austrian department store heavyweight it previously rebuffed.

The Canadian retailer said it is in talks with Signa Holding GmbH, a European company that made an unsolicited bid late last year for HBC’s German operations, but withdrew the offer earlier this year after it was rejected by the HBC board because it undervalued the business.

A statement HBC released Friday said the pair recently signed a non-binding letter of intent “with respect to the exploration of a potential joint venture,” but noted that “there can be no assurance that any such discussions will ultimately lead to a transaction” and that any deal would still be subject to board approval and third-party consents that are out of HBC’s control.

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Signa owns Kardstadt, a department store that sells everything from apparel to household appliances, while HBC runs similar businesses overseas called Galeria Kaufhof and Galeria INNO.

A potential deal between the two could pave the way for a German department store monopoly and signals that HBC still sees value in Kaufhof, despite its European operations seeing a 6.6-per-cent decrease in overall comparable sales in the last quarter.

HBC scooped up Kaufhof from German retailer Metro AG in 2015 for ***euro symbol*** 3-billion ($4.6-billion).

HBC declined to make a representative available to discuss the potential deal it is eyeing, but said it released a statement Friday in an effort to quiet recent reports suggesting that it had signed a binding agreement to sell or combine business or properties.

It said it publicized the exploration of a deal with Signa because it believes “it is prudent to advise stakeholders.”

Some of those stakeholders have been tussling with HBC for years now, especially given the retailer’s rocky recent performance that included a $400-million loss in the first quarter of 2018, compared with a loss of $221-million a year ago.

The most outspoken of the stakeholders has been Jonathan Litt, chief investment officer and founder of activist investor Land & Buildings Investment Management, who has repeatedly complained that HBC is really a real estate company, not a retailer, that has failed to outline a plan to unlock the “substantial real estate value trapped in the company.”

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Last month, he released a note saying HBC should look towards American department store chain Macy’s as HBC’s underperfomance “has become even more pronounced.”

“Hudson’s Bay could learn a lot from the way Macy’s has built a credible real estate team to help drive its turnaround,” Litt wrote, at the time. “One could even reasonably ask whether the most logical course for HBC at this point would be an acquisition by Macy’s as opposed to trying to play catch up.”

While Mr. Litt has been outspoken about the company’s real estate, a Lands & Building spokesperson declined to comment Friday about its take on HBC being in talks with Signa.